Gold Jumps 1.4% to One-Week High... What Is Driving It?

Spot gold rose 1.4 percent to $4,190.49 per ounce by 11:44 a.m. US Eastern Time, reaching its highest level in a week and marking a gain for the second consecutive day, while December futures rose 1.4 percent to $4,215.60. The metal is on track to end the week with a gain of nearly 1.2 percent, after falling on Wednesday to a two-month low.

The recovery came as the dollar eased and US Treasury yields stabilized after touching their highest levels in more than two decades in the previous session. Rhona O'Connell, head of market analysis at StoneX, said the main driver was "bottom-fishing, as a floor formed in the $4,000 range," noting that a new rate hike is already priced in, as are expectations of continued official sector purchases.

Han Tan, chief market analyst at Bybit, said US inflation data scheduled for next week could be the catalyst for gold's next major move, warning that sticky inflation pushing the Fed into a faster hiking cycle could force a retest of the $4,000 level. St. Louis Fed President Alberto Musalem said Thursday that the central bank will need to raise interest rates again to bring inflation back to its 2 percent target, while markets price in a 19 percent probability of a hike in October and an 84 percent chance of a hike of at least 25 basis points by December.

Among other precious metals, silver rose 2.6 percent to $60.89 per ounce, platinum climbed 3 percent to $1,683.96, and palladium increased 2.4 percent to $1,149.49. Reuters reported that Indian buying was slow as prices recovered, while Chinese trading remained quiet during a short holiday.

What do these terms mean?

Ounce: A global unit of measurement for the weight of precious metals, equal to about 31.1 grams, by which gold prices are set in the markets.

Futures: An agreement to buy or sell a commodity at a specified price today with the transaction executed at a later date, used by traders for hedging or speculation.

Bottom-fishing (Dip buying): Buying an asset after its price drops to low levels that an investor considers an entry opportunity, rather than selling out of fear of further decline.

Bond yield: The percentage return a bondholder earns from interest relative to its current price, which rises when bond prices fall in the secondary market.